Ohio Supreme Court Says Noncompete Clock Begins to Run Upon Merger

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In a recent decision, the Ohio Supreme Court determined that the clock begins to run on the noncompetition prohibition in employees’ agreements at the time their employer merges with another entity, not at the time the employees ultimately separate their employment with the surviving entity, years later.

The Court’s 4-3 decision in Acordia of Ohio v. Fishel is significant and controversial. Counsel for Acordia had argued that such a finding would displace over 150 years of well established Ohio corporate law governing the surviving company’s rights to all of the assets and property (in this case employee agreements) of each constituent entity to the merger.  Additionally, at oral argument, one of the dissenting justices asked how the employee agreements at issue differed from any other contract that a constituent company may have had with its customers or suppliers that survived following a merger.

In its decision, the Court was careful to find that the agreements were in fact transferred to the surviving entity in accordance with Ohio law.  However, these agreements only prohibited the employees from competing for a period of two years following their employment with their named employer, Frederick Raugh & Company, not with any successor entity.  Moreover, the Court stated that it was significant that the agreements did not state that they would apply to the company’s “successors and assigns.”  Therefore, the Court narrowly construed  the noncompete language at issue and found  the noncompetition restriction had expired years before the employees left Acordia and took over a million dollars of business to a competitor less than six months after terminating their employment with Acordia.

The Acordia decision points out the importance of having well drafted employee agreements which cover all the bases and provide for contingencies such as  assignment or corporate restructuring.  Additionally, in the event of a merger, the surviving entity would do well to make sure that new employment agreements and restrictive covenants are signed by its employees to protect against the result reached by the lead opinion in Acordia. 

In the digital age, justice never takes a holiday…

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Sasha VanDeGrift by Sasha VanDeGrift

Even when the courthouse is closed on the weekends and holidays, the wheels of justice are still turning.

The Montgomery County, Ohio Clerk of Courts, in keeping with Dayton’s rich history of technological innovation, has an extensive electronic filing system that allows attorneys (and judges) to file documents 24 hours a day, seven days a week, from virtually anywhere on the planet that has a secure internet connection.  Mont. Co. C. P. R. 1.37(IX)(A).  Each electronically filed document receives an electronic stamp that includes the date and time it was filed.  Mont. Co. C. P. R. 1.37(IX)(B). With a keystroke, a judge signs an electronic document “via a digitalized image of his or her signature combined with a digital signature.” Mont. Co. C. P. R. 1.37(VIII)(D)(4). This technology allows judges to decide cases even on days when the court traditionally is closed for business.

But believe it or not, there are people who do not like this development.

In Bank of N.Y. Mellon v. Ackerman, 2nd Dist. No. 24390, 2012-Ohio-956, the common pleas court judge electronically signed a decision granting foreclosure to the bank using the e-filing system even though the courthouse was closed for Veterans’ Day. The couple facing foreclosure appealed the decision, arguing in part that the decision was improper because the judge entered the decision on a court-holiday.  Id. at ¶ 11.

The Second District Court of Appeals disagreed, finding that the common pleas court had no specific time when it was obligated to render decisions and certainly could surrender its holiday to work on cases if the judge so chose.  Id. at ¶ 12-14.  The Second District also found no flaw with the use of an electronic signature.  Id. at ¶ 14.  The couple also never showed how they were arguably harmed by the manner in which the foreclosure decision was filed. Id. at ¶ 14.  The Second District upheld the use of the e-filing technology on a legal holiday, as well as the underlying merits of the foreclosure. (Interestingly, the Second District does not participate in the Montgomery County e-filing system.)

Regular readers of the Coollaw blog, particularly our segment How the TECH Are You, know that there are often negative consequences that arise out of technology’s ever-expanding presence in American life. Sometimes, these consequences require a fresh look at what the law sees fit to protect. But other times, technology puts us one step closer to accomplishing important societal goals, like providing justice that is as efficient as it is fair. Here, a judge used technology –and sacrificed a day off–to do just that.

The couple could ask the Ohio Supreme Court to consider the case, but it seems doubtful that the justices would want to discourage their colleagues on the bench from working overtime to achieve the courts’ raison d’etre.

Rockin Robin, Tweet Tweet Tweet

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Merle Wilberding  by Merle Wilberding

“Rockin’ Robin, Tweet, Tweet, Tweet” were some of the great lyrics from early Rock & Roll. Bobby Day brought this song to # 2 on the Billboard Top 100 in 1958. Although Bobby Day was a one-hit wonder, his “Rockin’ Robin, Tweet Tweet Tweet” lives on even today on You Tube ( http://www.youtube.com/watch?v=ocT1wFcYspE ).

Bobby Day could never have foreseen that “Tweet Tweet Tweet” would become the sounds of the times today, as everyone either tweets or knows someone who tweets, and as everyone either is on Facebook or knows someone on Facebook – - so much so that the tweets or other social media communications may be caught in the netting of the legal system. Just ask Jacob Jock who spent three days in the slammer because, while sitting on a jury, “friended” the defendant in the case.

There are other illustrations of jurors tweeting during the trial about their thoughts on the evidence, or posting their thoughts on Facebook. In fact, the corruption trial of Baltimore Mayor Sheila Dixon became known as the “Facebook Five” case because five jurors had “friended” each other during the trial. These practices have put at risk a number of cases on appeal.

It is clear that we must do something to keep these Rockin’ Robins and chatty jurors from “hoppin’ and a-boppin’ and singing [to] all the little birdies on Jaybird Street.” Think about the lyrics from that song and the potential for juror social media misconduct and then give me a response to these questions:

What should lawyers do to safeguard their client from social media misconduct?

What should judges do to safeguard their proceedings from social media misconduct?

Occupy Court Street: Tweets Lead to Subpoenas, Charges against Protesters

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Sasha VanDeGrift  by Sasha VanDeGrift

A quick tweet can help amass hundreds of followers to take action, whether it be to grab some Snapples and head to the park, or to grab a pen and draft a subpoena for three months worth of a Snapple-drinking protester’s tweets.  While the former has been known for months as “Occupy Wall Street,” its legal counterpart could easily be dubbed “Occupy Court Street.”

Fox News just reported that the New York City police are investigating an Occupy Wall Street’s Twitter posts about killing police officers.  The post that sparked the investigation said, “[w]e won’t make a difference if we don’t kill a cop or 2.”  While the user has not been identified, the user posted this comment under the Twitter account “Smackema1.”  NYC police are seeking a subpoena to Twitter to uncover the user’s identity. Read more on this story at http://www.foxnews.com/us/2012/03/19/new-york-police-probe-kill-cop-tweet-linked-to-occupy-wall-street-protests.

The real question is how Twitter will react. In another case, the Manhattan District Attorney’s Office sought a subpoena for tweets from Occupy Wall Street protester Malcolm Harris, who was charged with disorderly conduct related to the Occupy Wall Street protest.  Harris described the subpoena as “a phishing scam, but it’s from the prosecutors.”

The information the Occupy Wall Street subpoenas request is generally the same: they seek the user’s name, address, records of session times, the length of those sessions, the types of devices used to access Twitter, and any IP addresses from which the user connected.  As reported by Reuters, Twitter’s policy when it receives a subpoena for a user’s information is to notify users of the request, unless prior notification is illegal. See http://www.reuters.com/article/2012/02/01/us-protests-twitter-newyork-idUSTRE81003H20120201

For the legal eagles out there who were wondering why the Manhattan District Attorney has used subpoenas rather than warrants to obtain the information, certain federal laws allow police and/or prosecutors to obtain information from social media and telecommunications companies for their users without a warrant.  Some regular Coollaw blog readers may remember that the Second District Court of Appeals recently upheld a decision allowing police to use telephone records against a cell phone user that the police obtained by subpoenaing the cell phone provider.  See “Who You Gonna Call? Your cell phone provider knows…,” posted February 7, 2012.

Occupy Court Street is not limited to Occupy Wall Street protesters. In November 2011, U.S. Federal Court in Virginia ordered Twitter to grant the Justice Department access to non-public account information for three individuals believed to be affiliated with or supporting WikiLeaks.

http://www.readwriteweb.com/archives/twitter_wikileaks_online_privacy_implications.php

Much like Occupy Wall Street, Occupy Court Street has its detractors. Some privacy commentators have voiced concerns about police and prosecutors having the power to gather communications data so easily. Despite that, so far, Occupy Court Street appears to be here to stay.

Food Fights: How Tasty Treats Can Fuel Nasty Litigation

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Sasha VanDeGrift  by Sasha VanDeGrift

Never get between a man and his money… or his snacks.

For one Livonia, Michigan man, Joshua Thompson, a local movie theatre’s prices for concessions were an attack on both. So Thompson decided to put his money where his mouth is – by filing a class action lawsuit against the theatre in the Wayne County, Michigan Circuit Court.

According to Thompson, super-sized snack prices violate the Michigan Consumer Protection Act. While many hungry movie-goers may find his efforts very satisfying, it remains to be seen whether the court will chew on his claims for a while or spit them out.

Those who have not been to the movies in a while might find the prices hard to swallow: Thompson paid $8.00 for a Coke and a package of Goobers the day after Christmas. Bah humbug. Thompson apparently did his own research and learned that comparable goodies would cost roughly one-third the price if purchased elsewhere.

Thompson told the Detroit Free Press that he used to BYOC (“bring your own candy”) to that theatre, but that the theatre recently posted a sign banning outside food and beverages. Perhaps the most surprising part of this story is that he decided to file suit rather than sneak in contraband concessions.

There do not appear to be any similar cases in Ohio. That said, like the Burger King trans fat and the McDonald’s coffee spill cases were in their day, this is probably just the first helping of movie-snack litigation.

Filmgoer takes stand on costly snacks, sues AMC Livonia theater freep.com

Joshua Thompson loves the movies. But he hates the prices theaters charge for concessions like pop and candy. This week, the 20-something security technician from Livonia decided to do something about it: He filed a class…

Ohio’s Most Litigated Private Pool?

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Daniel Gentry by Daniel Gentry

An Ohio family in Mahoning County is demonstrating their commitment to property rights, swimming, or both.

In 1949, Ohio Edison obtained an easement for building and maintaining an electric transmission line, and currently maintains a 69,000 high voltage line within the easement area. More than 25 years later, in 1977, the Wilkes family purchased a home on a lot partially covered by Ohio Edison’s easement. In 1993, they installed an above-ground swimming pool and storage shed within the minimum safe distances from the transmission lines pursuant to the National Electrical Safety Code.

In November of 2008, Ohio Edison notified them to relocate or remove the structures within 14 days. The Wilkes retained counsel who was unable to resolve the dispute despite threatening to “have each and every employee of Ohio Edison who trespass or attempt to trespass on Mr. and Mrs. Wilkes’ property arrested and charged with all felony criminal statutes presently enacted in the State of Ohio.”

Ohio Edison filed suit on April 8, 2009 in the Mahoning County Common Pleas Court seeking to enforce the easement and obtain relief ordering the family to remove the structures. The Wilkes family also initiated a separate proceeding with the Public Utilities Commission of Ohio on August 5, 2009, and asked the PUCO to order Ohio Edison to move the transmission lines. After the PUCO dismissed the complaint, the Wilkes family appealed to the Ohio Supreme Court on May 3, 2011.

Meanwhile, the Mahoning County litigation that Ohio Edison started continued. In August of 2010, a court magistrate ordered the family to relocate the pool and the shed. After challenging that decision with the sitting judge who agreed with the magistrate, the Wilkes appealed. The trial judge declined to suspend his order while they appealed. On May 5, 2011 (while both appeals were pending), the trial court judge found the Wilkes to be in contempt of court and fined them. Soon thereafter, however, the court of appeals stayed Ohio Edison’s case on May 25, 2011 in order to allow the Supreme Court to determine the Wilkes’ appeal from the PUCO.

The Ohio Supreme Court decided on February 22, 2012, that the dispute belonged in court rather than before the PUCO. According to news accounts the next day, the family intends to battle on, and presumably will resume their appeal from the Mahoning County Common Pleas Court decision in the Ohio Edison matter.

While the Wilkes’ fight with Ohio Edison has been working its way through the courts and the PUCO, the Wilkes family has managed to avoid moving their pool and shed and otherwise could have continued to use them for three summer seasons. But the battle is not over yet and, in the final analysis, the Wilkes family will have to decide whether it was worth it to spend that amount of time and presumably a lot of money to try to protect their right to a private dip in the backyard pool. Perhaps the answer is already clear since the trial court issued an order on June 19, 2009 precluding the family from using the pool.

In re Complaint of Wilkes v. Ohio Edison Co., Ohio Slip Op. No. 2012-Ohio-609.

The full opinion may be found at the following link:
http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2012/2012-Ohio-609.pdf

Supreme Court’s GPS Constitutional Privacy Ruling Could Impact Private Employers

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Allison Michael  by Allison Michael

Recently, in U.S. v. Jones, the U.S. Supreme Court ruled that the Fourth Amendment (protecting a person’s reasonable expectation of privacy and against unreasonable search and seizure) was violated when law enforcement inserted a Global Positioning System (or GPS) device in a vehicle, without a valid warrant, and tracked the vehicle’s every move on public streets for a month. Although Jones is a criminal case involving the U.S. Constitution which prohibits unreasonable searches by government actors, the decision may have a ripple effect on private employers who use GPS and other tracking devices to monitor employees’ whereabouts.

Currently, only two states, California and Texas, have laws prohibiting use of GPS or similar devices in vehicles without the owner’s consent. There are also two recent federal bills pending which, if enacted, would likewise prohibit nonconsensual use of the devices in the private employment and other contexts. It can be expected that more states will follow lead and introduce similar legislation. In the meantime, the majority of states recognize a common law tort claim (a civil claim for damages) against an employer for breach of an employee’s right to privacy. Given the general lack of case law on tracking devices and privacy concerns, coupled with the strong, privacy protective message from the Supreme Court, it is likely that private sector employees will rely heavily on the Jones decision in making such tort claims and arguing that their employers violated privacy expectations in “unreasonable” tracking and monitoring scenarios.

In light of these considerations, private employers are cautioned to limit the use of tracking devices (whether in vehicles, smart phones, laptops, or other portable devices) to that which is reasonably necessary to satisfy the employer’s legitimate business needs. Legitimate business needs may include things such as investigation of misconduct, locating a stolen vehicle or lost driver, or verifying that a service call was made when a customer is denying it. Still, even where legitimate business needs reasons for tracking exist, certain precautions should be taken to reduce liability exposure for invasion of privacy claims.

First, employers should notify employees of the “who, what, when, where and why” of use of the tracking device through a written policy, and obtain the employee’s signature acknowledging receipt and review of the policy. Second, GPS and other tracking devices should only be used in company-owned vehicles or equipment. If the employee uses his/her own vehicle or equipment for business purposes during work hours, tracking should only be done with the employee’s consent and knowledge (and preferably only after the employee has refused to use the company vehicle or equipment that was offered to him/her). Third, with rare exception, employers should never track an employee’s whereabouts during non-work hours. A “rare” exception could be limited tracking to determine whether an employee is driving a company vehicle for personal reasons after work against known company policy, or to find out whether an employee is actually working after hours as he/she is claiming on his time card. Even these limited exceptions should only be used when the employer has received other reliable information that the employee is engaging in the alleged wrongdoing.

Following these guidelines may help reduce liability exposure for invasion of privacy claims, and, in any event, are simply “best practices” from an employee relations standpoint.